China moved further along with its reopening as it recently announced that cross-border travel between the mainland and Hong Kong would once again be reinstated, a move that further raises the improving sentiment on the Chinese economy. The gradual increase in mobility along with Beijing\u2019s commitment to a loose monetary policy bodes well for consumer spending prospects in the region in the 2nd half (2H) of the year, assuming COVID cases start to unwind.<\/p>\n\n\n\n
Given this, we may therefore take a look at three names with exposure to the Chinese market that could potentially benefit, namely EMI (Target Price: P14.90), JFC (Target Price: P287.90), and DNL (Target Price: P11.30).<\/p>\n\n\n\n
1. Emperador Inc. (EMI)<\/strong><\/p>\n\n\n\n While EMI currently does not have any upside to our Target Price of P14.90 per share, we note that momentum may finally be swinging back to its side after successive quarters of less-than-stellar earnings. <\/p>\n\n\n\n The reemergence of consumer spending in China during latter-2023 may further add fuel to its high-growth branded whisky segment (37% of revenues) which would positively tilt EMI\u2019s sales mix towards the higher margin products. We note that China has been one of the fastest growing markets for the company with a CAGR of 76% from 2015 to 2021. In addition to this, the availability of dry goods containers has also likely improved which would help solve the company\u2019s nagging logistics problems.<\/p>\n\n\n\n 2. Jollibee Foods Corp. (JFC)<\/strong><\/p>\n\n\n\n Likewise, the increased mobility would benefit JFC\u2019s dine-in sales in the region. China notably accounts for 7.5% of total systemwide sales, and this number is bound to increase in the future as JFC aims to get equal contributions from both its domestic and international businesses. <\/p>\n\n\n\n With the company\u2019s plan to open 100 stores in China this year, we expect the region to help serve as a catalyst for operating profits, and to compensate for the likely milder performance in JFC’s domestic front. 3. D&L Industries Inc. (DNL)<\/strong><\/p>\n\n\n\n Lastly, increased consumer demand and a potential revival in China\u2019s manufacturing sector would benefit DNL\u2019s high margin exports given that the country accounts for 30% of export sales. The arrival of the Batangas plant, which is set to operate in mid 2023, would therefore be timely and would likely further boost the company\u2019s margin performance.<\/p>\n\n\n\n
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